Official data shows buy-to-let mortgages have levels of arrears and repossessions no higher than mainstream loans, and in some cases are performing better.
It may be a coincidence that more financially sophisticated — and, according to J. D. Power, more skeptical — borrowers received more mainstream loans and were also more satisfied than in past years.
"Most consumers say, 'Who are these people?' but the fact is that these are mainstream loans with good pricing," said Glen Corso, the managing director of the Community Mortgage Banking Project, a trade group of 43 nonbank lenders.
The credit-card firm has done much to right itself since 2001, when the economic slowdown hit its sub-prime customers (ie, those considered too risky for mainstream loans) particularly hard and defaults soared.
"In fact, for every £100 of problem debt, payday loans never make up more than £1.20 of that debt, whereas credit cards and unsecured (mainstream) loans together account for between 60% and 70% of unmanageable debt.
But mortgage adviser Simon Tyler, of Tyler Mortgage Management, warns that a shared ownership mortgage usually comes with higher rates than mainstream home loans.
"That's a better risk-adjusted return than on current best-buy, three-year bonds or mainstream peer-to-peer loans," says a spokeswoman.
118 118 said that while mainstream lenders typically offer loans of £7,000 or more, and payday lenders offer short-term borrowing, there was a gap in the market for providers offering £2,000 over two years.
Whereas the financial crisis was caused by mainstream American banks making loans that they knew were likely to result in default, the low rate of default at Abacus showed the bank to be uncannily astute in reckoning the financial capacity of its borrowers.
